The size of government increased dramatically in most developing countries, giving rise to
huge areas of non-market relationships. Many institutions, including the public sector,
government-supported cooperatives and NGOs, faced only ‘soft’ budget constraints. Within
the public sector, this led to decision-making by ‘bureaucratic’ man (James), as well as rent-
seeking behaviour (Krueger, 1974); in the social sectors, public service was emphasised with
a combination of P/C and COOP relations practiced. In the emerging popular organisations
and NGOs, rhetoric strongly favoured COOP but practice exhibited a combination of P/C and
COOP.
Although there was more acceptance of COOP norms than before, some of the structural
changes were less supportive of COOP motivation. The mass migration to cities associated
with industrialisation weakened traditional cooperative arrangements. While new
communities developed, they were generally more unstable, with fewer kinship ties. But
other circumstances favoured the development of new-style COOP groups - for example
among new community organisations in the urban sector (both formal ones, like Trade
Unions, and informal ones), while rising inequalities gave rise to COOP-style claims
organisations. New community organisations also developed, often with redistributive
functions - for example the Harambee movement in Kenya. Informal efficiency-supporting
groups also developed among low-income producers (rural and urban) to overcome
indivisibilities and externalities (see e.g., Baland and Platteau, 1998), often adopting COOP-
relations.
M behaviour was officially given a relatively minor role, with restrictions on the role of
market incentives even within the private sector. However, in practice (and increasingly over
time), parallel activities developed in which market incentives prevailed. The expansion of
rent seeking and parallel markets was particularly marked where formal prices diverged
widely from competitive ones - one reason advanced for a more overt switch to monetary
incentives.
In sum, there was undoubtedly a mixed picture. The government, which became increasingly
dominant in the formal sector, was largely P/C, but encouraged a greater role for COOP
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